WHY: FEEL GOOD ABOUT WHAT YOU CHARGE
Earlier this month Seth Godin wrote a brief blog post sharing a simple formula for calculating hourly rates for independent contractors.
'Successful freelancers need to charge at least double the hourly rate that they'd be happy earning doing full time work. (In many fields, it's more like 4 or 5x).'
If the average proficient painter can make $20/hour ($40,000/yr) working as an employee, let's see what he should charge for contract work using this principle:
$20 x 2.5 = $50/hour
That should be your baseline figure. If you or your clients feel that is high - how can you reconcile the cost and feel confident about your ask?
One thing you can do is do the math...
Add up all your overhead costs associated with operating your business - licenses, permits, bank fees, bookkeeping & accounting fees, rental fees, cell phone, all the insurances, truck payments, internet, office expenses, tools, etc. These are all costs that you have to pay no matter how much you work. Don't include 'cost of sales' expenses like fuel and paint - expenses incurred only when working on a specific project (those expenses need to be added to your hourly wage, not included in it). Once you have a monthly total for overhead expenses, divide that by the number of hours you work in the business per month. But don't include hours working on the business. For me I found that I spent about 20-25% of my time on admin work that didn't directly generate income. So if I wanted to work 40 hours per week total, really I was only working 30-32 hours applying paint. Let's see how that looks:
$1500 - monthly overhead = $12/hour
$35 - desired hourly wage + $12 overhead = $47/hour
$35/hour x 1.20 (to account for admin time) = $42 + $12 overhead = $54/hour
$54/hour + 10% for profit and business investment = $59.50/hour
Consider that a guideline for a fair minimum wage that will allow you to do your work efficiently and at a high level of quality while providing for your family. There is even a little buffer in there for growing and investing in your business. Your specific rate will depend on your own particular variables, market and goals. If that seems high, consider your costs of providing your own comprehensive benefits and retirement planning. And if it still seems high, look at the Statistics Canada figures outlined below. Consider what charging $20-25/hour does to your micro business. How does it impede you from reaching your goals? How does it affect your customer service? If you charge by the hour and you feel uncomfortable asking for $50+, you can list it as "Pro-painter + service truck". This tells the client that you are not pocketing $50/hour. You don't always have to state your rates or charge by the hour - you can price jobs based on a project cost. But it is good to figure out what you need to make per hour as a guideline.
Unfortunately, it seems that painting is not a trade that is as highly valued as other trades. Mechanics, electricians and plumbers can charge double or triple what a lot of painters feel comfortable charging. Sure, the barrier to entry is lower. There isn't the schooling and amount of specialty tools required. But maybe the main reason painters don't charge enough is themselves. We just don't ask. We don't value ourselves and our skills enough. Painting is a complex and highly skilled trade with a fair degree of health risks involved. Good painting work adds more value than it costs - making it a good investment for our clients.
Stop thinking of your hourly rate from the perspective of an employee and start thinking of your rate as a business person. There are funner ways of being broke than running around completely stressed out trying to serve too many customers and working all time, just to scrape by or even go backwards. No one is happy in that scenario and it is not sustainable.
Consider what doubling or tripling your prices could do for your business. If it makes you uncomfortable, that might be a good thing.
*one caveat - if you are not as busy as you want to be, raising prices might not be your first priority (although low prices might be attracting the wrong customers and driving away good potential customers)
Average income for a painter in Canada: $40,000 (equals $20/hr)
Median family income in Canada: $80,000 (equals $40/hr)
Median family income in BC: $75000 (equals $37.50/hr)
Average household income in BC (2 income families): $120,000 (= 2 working full-time @ $30/hr)
Average household income in BC (1 income family): $90,000 (= 1 working full-time @ $45/hr)
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